CENTRAL INTELLIGENCE AGENCY
WASHINGTON. DC ICSOS
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MEMORANDUM FOR: Bill Milan
Office of Fuels and Energy Department of State
to "Petroleum Supply Vulnerability Assessment"
Attached is our contribution to the PetroleumAssessment on the Soviet Union'sfor Western oil fieldich we Comments or questions are welcome and mayto mo
Attachment: as stated
ice of Economic Kosearch
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nwosKible to iX'tenrune
MICRO. ONL^ l^NlirV0
The Soviet Meed for OS Oil Field Technology
He believe that oil supplies willritical problem for the OSSR and its client states over the next several years. Oil production in the USSR will soon peakperhaps as early as next year, but not later than the and then will probably decline rapidly. The USSR has been importing large amounts of US and other Western equipment for its oil and gas industries. Of its current output of8, ats producable only because of past imports of US pumps.
The USSR will need substantial additional Western oil field technology and equipment to stave off or slow theproduction decline. Although some of this equipment is avaiJable in Western Europe and Japan, the United States is the only source for much of this equipment and know-how. The following pages examine key areas where US equipment and expertise could mitigate the anticipated near-term decline in the USSR's oil production.
The Technology Gap
Rapid growth in oil production in the USSR duringas made possible mainly by the discovery of large and accessable oil fields in theegion. Thia oil was relatively shallow and the fairly rudimentary indigenous technology and capital supplies were sufficient
CONFI&ENuAl
to allow production to grow rapidly. By the, however, production from these regions was threatening to decline, and the Soviets began to greatly increase thedevoted to oil production. Large resources were
committed to the development of West Siberia,/the USSR began massive purchases of Western technology and large diameter pipe in the. (See table.)
Acquisition and Use of Western Technology equipment
Imports of / have contributed 'greatly to the continued expansion of Soviet oil production High volume US pumps have stavedecline in output in the Urals-Volga and added ato output. Even so, much Western equipment is often not as productiveoviet setting as it is on native ground. In the petroleum industry this is probably particularly true of exploration equipment.
The major means of acquiring Western technology is by purchasing machinery and equipment. Other channels Include the acquisition of turnkey plants, technical data, contacts with Western firms and scientists, aiid formal arrangements for joint research and exchange of scientific and technical information. Science and technology agreements already exist with three American firms in the areas of geology, geophysics, petrochemicals, and petroleum processing.
None of these means have lived up to Soviet expectations.
USSR: Orders of Western Oil and Gas Equipment-^
From the West
of which:
OS Equipment
(Million US6
% DS
IT Excludes imports _ofpipe, which totaled an additional $4
'iustpy is slow to get foreign technology into operation and even slower to spread itiven industry. Soviet labor is unfamiliar with complex foreign Machinery, spare parts for foreign equipment are often in short supply, and maintenance programs are frequently inadequate. The presence of Western technicians on aite during theand shake down of new equipment could alleviate many of
these problems, but the Soviets have been reluctant to allow it.
S leverage standpoint, straight equipment sales are preferable to other forms of technology transfer. Through the acquisition of production machinery, know-how, and turnkey plants, the USSR couldignificant degree ofand flexibility which it otherwise would not have. Evenoviet standpoint, the purchase of complete plants ia not the ideal solution because of disproportionately large expenditures and very long lead times inherent to such trans-
actions.
o Technology Transfer
uch of the oilfield equipment now being purchased by the USSR were trade control items. Since that time, the major impediments to increased Soviet acquisition of US oilfield technology havecarcity of hard currency
the part of tho USSR, and
some types of oilfield equipment in Western markets.
In three of the equipment areas most crucial to Soviet needsdownhole submersible pumps, drill bits, and rotary drilling rigsthere is little or no idle capacity and order backlogs are high. The production capacity of US companies has been largely based on US demand, with some allowance for exports based on historical experience. US companies are reluctant to invest in expensive plant and
equipment to supply an uncertain export market. If the USSR
expects to obtain large amounts of this equipment, it probably
will have to be prepared to make co-nmitraents in the next few
years for long-term purchases of equipment in.
Soviet Equipment Needs
By almost any measure, the Soviet oil industry lags seriously behind USWestern state-of-the-art. Por example, seismic exploration equipment currently in use is vintage, inadequate for mapping deep-faulted structures and stratigraphic traps. In Siberia, digital field computers for seismographic mapping of prospective structures and for
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logging test wells arevirtually nonexistent.
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The drilling picture is even bleaker. 5 the US
drilled more meterage than the USSR didith
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about the same number of rigs. American made drill bits last at least
imes longer than Soviet-made bits. The Soviets have
no scientific drilling fluid program. Multizone wellequipment is scarce. The most obvious deficiency in Soviet equipment iianufacture is the lack of modern offshore technology. At present the USSR haa two modern and two obsolete1 jack-up drilling platforms, all operating in the ahallow watera of the Caspian Saa.
The followingetailed evaluation of equipment and technology needed by the USSR.
High Volume Deep Well Pumps
Because of severe water encroachment in fields accounting for the bulk of Soviet oil production, increasingly large volumes of water must be lifted for each barrel of oil To increase total fluid {oil and water) recovery, large numbers of high capacity submersible pumps and/or other fluid lifting equipment must be used in the important Urals-Volga region and in newer fields in West Siberia. Although the USSR and aome West European countries produce oil well pumps, the only pumps adequate to deal with the Soviet lifting problems are produced in tha US and are in relatively short aupply. During theears the USSR has bought more
f these pumps from the United States and is trying toS firm to agree toumberaible pumpplant in the USSR that willnits per year.
Given the rapid rise in fluid lifting requirements, US pump3 are absolutely critical to the USSR. ByS high-volume pumps in the USSRombined lifting
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capacity off fluid. The average water
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cut in the Urals Volga and West Siberia was probably at least
ercent These US pumps could have added as much
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o Soviet oil production capacity.
However, since only aboutercent of the pumps would be
in service at any one time and, in the absence of US pumps,
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the Soviets would probably have used much smaller capacity
units, the net gain to output attributable to the pumps in
as at.
The Sovietsumps6 and canaximumore for delivery. They have optionsumps from the Byron Jackson division of Borg Warner, and the Reda pump division of TRW anticipates ordersear.
In general, the pumps the Soviets are now buying are of still larger capacity than those purchased. Total lifting capacity of pumps under option or available during
0. Most of
this capacity is accounted for byeda ?ump units
) that could be delivered at the rate of
er year Even if the average
water cut rises toercenthese new pumps will add
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o oil outputssuming anercent in-service rate. Without receipt of the pumps now on order, Soviet output would quickly slump. 0 output would probably neto.
Gas Lift Equipment
As an alternative to high-capacity submersible pumps, the Soiets are negotiating for large-scale purchases of US gas-lift technology for use in two of the largest oilfields in West SiberiaSamotlor and Fedorov. They hope toontract for about SI billion worth of equipment for this project from US, West European, or Japanese suppliers by the end
The technology to produce the downhole gas lift equipment
does not exist outside the US. .Consequently, all equipment
than compressors
firms or license: from US / Given the
for the proposed gas-lift project other (valued0 million) must be bought long lead times involved in design, production, andof such equipment, it ia doubtful that the USSR could
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have all the unite inatalled before thejearly to.
owever, ifnits under negotiation
are installed and operating, total fluid lifting capacity
could be increased by roughly.
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Drilling Equipment
The Soviet Oil Ministry plans to increase total drilling toillion metersoal unlikely to be achieved unless they increase development drilling at the expense of exploratory drilling. , drilling by the Oil Ministry totaledillion meters:illion were for exploration, whileillion went for development.
The Soviets use three types of drilling equipment: turbo-drills, rotary drills, and electric drills. Aboutercent of Soviet drilling rigs are turbo equipment initially produced innd. Almost all the others are rotary drill. The third type of rig, the electric drill, is essentially experimental. Although the Soviets have tested electric drills extensively, technical problems have not been solved.
Despite the obvious shortage of drilling rigs, the Soviet rig park has remained esicntially unchangedeep-well rigs. Meeting the plan for both exploratory and development drillinggoals would require increasing the number of active rigs (of Soviet design) by nearlyercent. No evidence is available, however, to show that the Soviets have planned for or have the capacity to boost their rig supply or would be able to provide trained crews fo. the additional rigs.
Modern|US rotary drilling equipment wouldistinct
asset to the Sovieta in searching for and developing new
fields. In the US, wells can be drilledeters in about one month, comparedonths in the USSR. As the average depth of drilling increases in the USSR, rotary drilling would be still moreoviet wells deepereters usually take moreear to drill. Accordingecent Sovieteter wells average aboutears each to drill. Although investment costs will be great, the USSR probably would gain greatly from converting to modern rotary drilling technology for exploratory drilling. j
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The USSR manufactures anillion rock bits
of all types annually, compared with onlyn
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the entire Western world. Their quality, however, is poor
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compared with Western bitB.
Large numbersarrow selection of bits are used in
the USSR. Host Soviet bits are specified for drilling
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according to depth and not according to the type of strata
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being drilled. With the extensive use of the turbodrill system,
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the weight of the drill string is not placed on the bit and,
short of raiFing the entire drill string to inspect the bit,
there iB no way of determining bit wear. esult, many
bits are replaced prematurely.
The Soviets recognize that better quality bite woulddrilling efficiency and would permit wells to be drilled
more rapidly. They have purchased small quantities of uS drill bits, and have been tryingears tournkey plant to produce US-design bits. However, as the price of the plant escalated during the negotiction period, the Soviets decided to seek lower-cost US assistance to re-equip an existing Soviet plant to produce these bits. Negotiations for the re-equipmentillion) are In the final stages,ontract is expected to be signed this year.
Drill Pipe
The supply of drill pipe in the USSR is not adequate in sizes, quantities, and quality required, especially in cold climates and difficult well conditions. Soviet drill pipe is either of heavy wall construction, which requires much heavier drilling rigs to support the additional weight, or is made of expensive aluminum alloys, costing three times as much as Western pipe. Because of its poor metallurgical composition and the torque of the downhole turbine, Soviet
drill pipe is easily sheared, causing costly delays and
sometimes abandonment of the well if tha drill pipe becomes
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lodged in the borehole.
As the requirement to drill to greater depths increases,
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both onshore and offshore, the USSR will need large amounta
high-quality drill pipe. For
it will have to come from the Weat. US companies
onto drill pipe control the technology for flash welding tool joints/and are
pve-eminent in the production of drill pipe that can take
the high stresses of deep rotary, drilling.
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Drilling Fluid Technology
Scientifically planned drilling-mud programs axe almost unknown in the USSR. There is not enough prepared mud available and most drilling ciews use local clay, regardless of its condition, mixed with water and additives. To prevent blowouts, drillers add hematite or anything else hardy to
make muds heavy. In situations where circulation of mud is
lost, drillers pour down straw, wood chips, and the like to
solidify the mud sufficiently to recondition the hole and restore circulation. pII is completed, mud is stored in barrels for the nexto matter what conditions may require. Such practices, especially in deep drilling, cause extensive formation damage and invasion problems in possible petroleum-bearing formations that render logalmost useless and can cause wells to be abandoned needlessly. .>
US drilling fluid technology is highly advanced and Many chemical additives and fluids are mixed in scientific proportions to tailor the mud precisely to local drilling conditions in order to remove cuttings effectively and coat the well-bore surface to prevent the sloughing of rock chips and pebbles into the hole. US drilling fluid
technology could rjreatly improve Soviet drilling efficiencies in both exploration and production.
flultizone Completion Equipment
Multizone completion equipment is relatively scarce in the USSR, necessitating the drilling of separate holes for each producing zone in many fields. The Toviets now buy this equipment from the US, acquisition of additional multirone completion equipment would permit iirrortant eorxKrides in reduced drilling costs, as well as savings in casing, tubing, flow lines, and pumping equipment.
Cement
A related problem is the need for better cement and cementing practices to improve well completion and to seal the well bore against the entry of ground water. The Soviets have indicated interest in US technology in these areas.
Exploration Equipment
For the long-run, finding new oil reserves is even more important than increasing the yield of existing fields. In the present five-year plan, sizable reserves must be found, to maintain production at or near current levels as output declines in the older fields.
Seismic and Well-Logging Equipment
Soviet seismic and well-logging instruments lag their US counterparts by at least ten years, largely the result of the enormous gap between US and Soviet electronics technologies.
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Poor seismic and well-logging equipment often prohibitB the collection and recording of good data. Compoundingevere shortage of digital processors offor on-site evaluation end analysis of the data. Theae deificiencies make the USSR unable to map accurately
deep-faulted formations, permafrost structures, and strati-
graphic trapc. Likewise, well-logging suffers because of
the lackpability to digitally analyze data from test well*. Although some seismic and digital processing equipment is available in Western Europe and Japan, the best for Soviet needsespecially portable field computersis made in
the
Offshore Equipment
The most obvious deficiency in Soviet oil field operations is the lack of modern offshore equipment and technology. Soviet offshore experience thus far has been limited chiefly to relatively shallow waters of the Caspion and Black Seas, wehre operations are conducted chiefly from trestles extending from the shore or from man-made islands. The USSR now has
four mobile offshore drilling
the Caspian Sea, and only one
water as deep aseters.
the USSR to move to deeper water
the Arctic Seas or the Sea of
experience, technology, and equipment will be essential.
Although the US ia the world leader in this technology, Dutch,
French, Norwegian, British, and Japanese firms can supply
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some offshore equipment and know-how. The Soviets recently
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ontractS firmest Europe:ompany toard on the shores of the Caspian Sea to produce offshore mobile drilling'rigs. The firr;built semi-submersible ritf in the USSR is due to begin operations
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Original document.
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